I just saw the headlines from a report this week that Google is earning $1.10 of every new search dollar spent. This didn’t make sense (obviously) because Google is magic, but I couldn’t imagine how they were creating money out of nothing. Turns out that the explanation is simpler:

“For every new dollar spent on search in Q2 2008 versus Q2 2007, $1.10 went to Google. Yahoo lost $0.09, and Microsoft lost $0.01. In other words, advertisers are putting all of their new search dollars into Google, and pulling money out of Yahoo Search and Microsoft Live Search.”

Looks like Efficient Frontier Insights, the company that published Search Engine Performance Report: Q2 2008, is looking for publicity with that headline, because it isn’t really accurate. Google may be taking money away from Yahoo and MSN, but they aren’t taking $1.10 of every NEW dollar. Google may be taking old dollars away from its competitors, but it isn’t creating money out of nothing.

Nevertheless, the news remains strong for search advertising. Some other highlights from the report – CPC rates increased for all three search giants compared to Q2 of last year, as did ROI.